The Great Escape: Technological Lock-in vs Appropriate Technology in Early Twentieth Century British Manufacturing

America’s lead over Europe in manufacturing productivity from the late nineteenth century onwards has often been contributed to differences in initial conditions, trapping Europe in a relatively declining, labor-intensive and low-productive technological path. In this paper, I reassess the productivity dynamics in British manufacturing on the basis of a novel analytical framework by Basu and Weil that emphasizes the role of learning and localized technical change and which predicts convergence in light of rapid capital deepening. By means of a data envelopment analysis, I measure the effects of capital accumulation, technological change, and efficiency change. I find evidence for considerable increased capital-intensity levels in British manufacturing during the early twentieth century, particularly in the ‘new’ industries which actively began to adopt modern techniques of mass-production and managerial control. My findings seriously challenge the traditional, declinist, technological lock-in hypothesis. Instead, the British shift toward mass-production techniques during the interwar period provides a strong case for a remarkable escape from the labor-intensive path which had held the British manufacturing sector in its grasp throughout the nineteenth century.